The banking watchdog in Australia says that home lending regulations won't be loosened

Amid concerns that the overall risk to the financial system remained high, given the uncertainty surrounding interest rates and the economic outlook, Australia's banking regulator announced on Monday that it will stick to its stringent guidelines for home loan lending.

The forecast is hampered, according to the Australian Prudential Regulation Authority (APRA), by geopolitical unpredictability, household debt, and inflation that remains beyond the goal range set by the central bank. As a result, the APRA has decided to maintain its strict approach to home lending in order to mitigate the potential risks posed by these factors. This signifies that borrowers will continue to encounter stringent lending criteria, ensuring that the stability of the financial system is maintained.

In a statement, APRA Chair John Lonsdale stated that it is critical that conservative buffers be included in serviceability assessments due to the uncertain outlook for the economy and interest rates, which may include increased pressures from the cost of living.

The country's major lenders are required by regulation to determine whether prospective borrowers have the ability to repay their loans at interest rates that are at least three percentage points higher than the current rate on home loans. This guideline will remain in place.

In order to give banks a further capital cushion in times of crisis, the countercyclical capital buffer will continue to be established at 1.0% of risk-weighted assets.